ADF-test, Runs test and test for serial correlation based on regression are conducted to test for stock market efficiency. The empirical results show that the index prices follow Random Walk, despite this, the historical returns are highly serial correlated, leading to the conclusion of stock market inefficiency in Russia and Baltic. There is also found serial correlation between todays’ return in the Russian and Baltic stock markets and yesterdays return in US markets. An out of sample test is conducted to test whether a strategy based on historical price information, from both own prices and prices of SP500, may outperform a buy and hold-strategy. When Including transaction costs, there is found no strategy for the indexes in Russia, Latvia and Lithuania which outperformed the market. A strategy for the Estonian index, based on historical price information of SP500, has outperformed the market every year, including transaction costs.

Correlation analysis, Grangers causality test and Engle-Granger test for cointegration are conducted to test for stock market integration. The correlation between returns of the indexes have risen in the period, indicating lower benefits from diversification in these stock markets. The results from Grangers causality test show that the Russian and Baltic stock markets are highly driven by international stock markets. The results from the Engle-Granger test indicate a long term relationship between the Russian/Baltic stock markets and US stock market. The exeption is between Estonian and US stock markets. All these findings indicate that the stock markets in Russia and Baltic should not be used to diversify. Despite this, the stock markets have shown great oppurtunities for big returns in recent history. The Russian and Baltic stock markets may be seen as good alternatives for less riskavers investors, who are looking for high returns.